Justices Lean Hard on AT&T Attorney in Key Class Action
Justices indicated skepticism over AT&T’s position Tuesday, as the Supreme Court heard oral argument over whether a state can prohibit wireless contracts that allow only arbitration, not class action lawsuits. Conventional wisdom, some observers say, has been that the court, which is generally perceived as pro-business, would side with AT&T in a decision with implications well beyond the telecom sector. But Andrew Pincus, attorney for AT&T, faced many more pointed questions than the attorney for the California couple who brought the case,
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The events that led to AT&T Mobility v. Concepcion, date to 2002, when Liza and Vincent Concepcion signed a service contract with AT&T to buy a phone for $149 and get another at no charge. AT&T charged the Concepcions $30.32 in sales tax, including on the second phone.
In 2006, the Concepcions filed a class-action lawsuit against AT&T, charging that they should not have had to pay sales tax on the second phone. Their service contract specified that they had to take any disputes with the carrier to arbitration. A federal district judge in California ruled the prohibition in the contract “unconscionable” under state law and that the lawsuit could proceed. The U.S. Court of Appeals for the 9th Circuit, in San Francisco, agreed, denying arguments by AT&T that the Federal Arbitration Act did not prohibit the California law on unconscionability.
AT&T’s Pincus faced tough questions from liberal and conservative justices. “Are we going to sit in judgment” of California’s interpretation of what’s unconscionable? Justice Antonin Scalia asked. “Are we going to tell the state of California what they're to find unconscionable?"
Justice Stephen Breyer questioned whether the state was applying the rules in a discriminatory way. “That’s like Switzerland having a law saying we only buy milk from dairies above 9,000 feet,” he said. “That discriminates. To say they only want cows that have passed the Bactrillum test, that doesn’t."
Justice Elena Kagan also questioned whether the Supreme Court is in any position to judge the state’s unconscionability law. “It may be good unconscionability doctrine and it may be bad unconscionability doctrine, but it’s the state’s,” she said.
Chief Justice John Roberts led the questioning of Deepak Gupta, who represented the Concepcions, asking whether the California law violates federal law requiring states to treat arbitration agreements the same as any other contract. “It’s a different mode of analysis than any I'm familiar with under contract law,” he said. Justice Samuel Alito also appeared skeptical of Gupta’s arguments.
Consumer advocates warned that if AT&T wins the appeal, class-action lawsuits could largely disappear. “The right of consumers to band together to take action against corporate rip-offs is something that is enshrined in case law, enforced by the state courts and depended on by average Americans as a catchall to fight corporate fraud,” said Lisa Gilbert, deputy director of Congress Watch at Public Citizen. “We face the potential death of this right."
Brian Fitzpatrick, associate professor at Vanderbilt Law School, said the case could be one of the most important decided by the court in several years. Fitzpatrick predicted that AT&T could win the case. “The current court is very friendly to businesses, and there is nothing businesses would like more than to exempt themselves from class action proceedings,” he said in an op-ed piece in the San Francisco Chronicle.
AT&T warned in a filing that if the 9th Circuit decision is allowed to stand, it “will be the death knell for consumer arbitration in California, and possibly in many other States within that Circuit.” AT&T said it has more than 10 million subscribers in California, and all signed contracts agreeing to resolve conflicts through bilateral arbitration. “The arbitration provision affords customers fair, inexpensive, and convenient procedures and, in addition, provides them with affirmative incentives to pursue even small claims on an individual basis,” AT&T said.
CTIA filed an amicus brief for AT&T arguing that most of the 240 million U.S. mobile subscribers have service agreements that expressly require arbitration. “That consent to individual arbitration forms one of the most important provisions of their agreements,” CTIA said. “By providing that disputes should be resolved through arbitration rather than litigation, and brought on an individualized basis, carriers are able to lower their costs, streamline their dispute resolution process, and maintain amicable and productive relationships with their customers."
Class-action lawsuits don’t deter bad behavior, the U.S. Chamber of Commerce said in a brief. “The most likely effect of forcing class arbitration on companies is to cause them to abandon arbitration altogether,” the Chamber said. “To the extent such abandonment occurs, consumers and employees will lose the many benefits of arbitration as they are herded into onerous litigation -- or, more likely … simply abandon their claims in frustration."
But the NAACP said in an amicus brief that class-action lawsuits are the only way for those facing discrimination to seek companywide reform. The National Workrights Institute said arbitration has an important role in employment cases, but lawsuits remain “indispensable for the vindication of certain workplace rights, especially for lower-income persons.”